WALDORF, Md., Oct. 29, 2018 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ: TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), reported its results of operations for the third quarter and nine months ended September 30, 2018.
The Company reported net income for the three months ended September 30, 2018 (“2018Q3”) of $3.9 million or diluted earnings per share of $0.70 compared to net income of $2.8 million or $0.60 per diluted share for the three months ended September 30, 2017 (“2017Q3”). The third quarter results included merger and acquisition costs net of tax of $8,000 and net of tax of $257,000 for the comparative quarters. Merger and acquisition costs did not change earnings per share for 2018Q3 and resulted in a reduction to quarterly earnings per share of approximately $0.06 for 2017Q3. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.96% and 10.29% in 2018Q3 compared to 0.80% and 9.99% in 2017Q3. The Company completed the acquisition of County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size by $200 million to just under $1.6 billion. As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. The first six months of 2018 included operating expenses to support the merged operations with County First Bank. The closure of four branches and reductions in headcount during the second quarter positively impacted the Company’s operating expense run rate in the third quarter 2018 with noninterest expense decreasing $1.3 million to $8.5 million for 2018Q3 from $9.8 million for 2018Q2.
Net income for the nine months ended September 30, 2018 (“2018YTDQ3”) was $7.4 million or $1.34 per diluted share compared to net income of $7.7 million or $1.65 per diluted share for the nine months ended September 30, 2017 (“2017YTDQ3”). The first nine months results included merger and acquisition costs net of tax of $2.7 million and net of tax of $494,000 for the comparative periods. The impact of merger and acquisition costs resulted in a reduction to nine-month earnings per share of approximately $0.48 for 2018YTDQ3 and $0.11 for 2017YTDQ3. The Company’s ROAA and ROACE were 0.62% and 6.68% in 2018YTDQ3 compared to 0.75% and 9.38% in 2017YTDQ3.
“Our continued focus on expense control and our team’s execution of the County First Bank transaction resulted in expected cost saves being realized on schedule. Net income in the third quarter increased $1.5 million or 65% to $3.9 million compared to the prior quarter,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “In the third quarter, the Company’s efficiency ratio and net operating expense ratios1 decreased to 61.4% and 1.85%. We are optimistic that increased top-line revenue and our commitment to control the growth in expenses will further improve our efficiency over time.”
“With the successful integration of the County First acquisition, the Company has created a sound deposit franchise,” stated Michael L. Middleton, Chairman of the Board. “Going forward, our investments in service delivery platforms should allow us to continue the growth in core deposit relationships.”
Highlights at and for the three and nine months ended September 30, 2018 include:
- As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch was rebranded and will remain open. The three bank locations that were held for sale were sold during the first nine months of 2018. The remaining closed branch lease will expire in December 2018.
- Gross loans increased 13.7% or $157.7 million from $1,150.0 million at December 31, 2017 (“2017Q4”) to $1,307.7 million at 2018Q3, primarily due to the County First acquisition. Gross loans increased $17.3 million (5.4% annualized) from $1,290.4 million at June 30, 2018 (“2018Q2”) to $1,307.7 million at 2018Q3.
- Transaction accounts increased $133.1 million, or 15.2% (60.8% annualized) to $1,010.5 million at 2018Q3 from $877.4 million at 2018Q2. Transaction deposit accounts increased to 69.6% of deposits at 2018Q3 from 66.3% of deposits at 2018Q2 and 62.8% of deposits at 2018Q1.
- Total deposits have increased $346.1 million to $1,452.4 million in the first nine months of 2018, which included an increase in transaction accounts of $355.8 million and a decrease in time deposits of $9.7 million.
- Wholesale funding as a percentage of assets decreased to 4.98% at 2018Q3 from 8.71% at 2018Q2, 12.50% at 2018Q1 and 18.63% at 2017Q4. Wholesale funding includes brokered deposits and Federal Home Loan Bank (“FHLB”) advances. Wholesale funding decreased $178.3 million or 68% to $83.6 million at 2018Q3 from $261.9 million at 2017Q4.
- Liquidity has improved with the increase in transaction deposits and decrease in wholesale funding. The Company’s net loan to deposit ratio has decreased from 103.1% at 2017Q4 to 89.4% at 2018Q3. The Company expects some seasonality in deposits that will likely increase the loan to deposit ratio into the low to mid 90s in the fourth quarter of 2018. The Company intends to use available on-balance sheet liquidity to fund loans, increase investments and pay down wholesale funding.
- Classified assets as a percentage of assets have improved in each quarter of 2018, decreasing 135 basis points from 3.58% at December 31, 2017 to 2.23% at September 30, 2018.
- Non-accrual loans, OREO and TDRs to total assets decreased one basis point during the third quarter to 2.05% at September 30, 2018 compared to 2.06% at June 30, 2018. At 2018Q3, non-accrual loans, OREO and TDRs to total assets of 2.05% increased 34 basis points from 1.71% at December 31, 2017.
- Tier 1 leverage ratio increased to 9.51% at 2018Q3 compared to 8.79% at December 31, 2017.
- Net income increased $1.5 million to $3.9 million, or $.0.70 per share, compared to $2.4 million, or $0.42 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.96% and 10.29% in 2018Q3 compared to 0.59% and 6.34% in the prior quarter. The increase in earnings was primarily the result of the reduction in the Company’s expense run rate with the successful integration of the County First transaction. In addition, increased net interest income and lower loan loss provisions contributed to the improvement.
- Operating net income2 increased $985,000 to $3.9 million, or $0.70 per share, compared to $2.9 million, or $0.52 per share, in the prior quarter. The Company’s operating ROAA and operating ROACE were 0.96% and 10.31% in 2018Q3 compared to 0.73% and 7.82% in the prior quarter. The increase in earnings was primarily the result of decreased merger costs, the reduction in the Company’s expense run rate with the successful integration of the County First transaction, increased net interest income and lower loan loss provisions compared to the prior quarter. Merger costs, net of tax, decreased from $546,000 in 2018Q2 to $8,000 in 2018Q3.
- Net interest margin increased two basis points from 3.41% in 2018Q2 to 3.43% in 2018Q3. Net interest income increased $350,000 to $12.8 million in 2018Q3 compared to $12.4 million in 2018Q2. Net interest margin would have been reduced one basis point in 2018Q2 to 3.40% and six basis points in 2018Q3 to 3.37% if the impacts of accretion interest and nonaccrual interest were excluded. Third quarter 2018 interest income included interest recognized on a cash basis of $80,000 for nonaccrual interest that was reversed in the prior quarter and accretion interest of $161,000. Second quarter 2018 interest income included non-accrual interest not recognized of $117,000 and accretion interest of $152,000.
- Noninterest expense of $8.5 million in 2018Q3 decreased $1.2 million compared to $9.7 million in the prior quarter, primarily due to a normalization of the Company’s expense run rate with the successful integration of the County First acquisition. Merger and acquisition costs of $11,000 were recorded in 2018Q3 compared to $741,000 in 2018Q2. In addition, the second quarter included costs related to operating five County First branches. As expected, the Company’s expense run rate was positively impacted in the third quarter due to the four branch closures and reduced employee headcount. The Company’s expected expense run rate for the fourth quarter of 2018 is $8.4 million to $8.6 million.
- The GAAP efficiency ratio was 61.40% in 2018Q3 compared to 73.23% in 2018Q2. The non-GAAP (or “operating”) efficiency ratio3, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 60.09% in 2018Q3 compared to 65.51% in 2018Q2. The decrease in the non-GAAP efficiency ratio was due to increased net interest income and a reduction in the Company’s expense run rate.
Loan yields on repricing and new loans began to rise in the second half of 2017, influenced by increases in the federal funds target rate and loan growth in higher yielding portfolios. End of period projected loan yields have increased since the third quarter of 2017. The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:
| Weighted End of Period Contractual Interest Rates | ||||||||||||||||
| (dollars in thousands) | September 30, 2018 EOP Contractual Interest rate | June 30, 2018 EOP Contractual Interest rate | March 31, 2018 EOP Contractual Interest rate | December 31, 2017 EOP Contractual Interest rate | September 30, 2017 EOP Contractual Interest rate | |||||||||||
| Commercial real estate | 4.56 | % | 4.55 | % | 4.50 | % | 4.43 | % | 4.38 | % | ||||||
| Residential first mortgages | 3.90 | % | 3.91 | % | 3.88 | % | 3.88 | % | 3.87 | % | ||||||
| Residential rentals | 4.75 | % | 4.76 | % | 4.72 | % | 4.63 | % | 4.60 | % | ||||||
| Construction and land development | 5.13 | % | 5.22 | % | 5.11 | % | 4.99 | % | 4.88 | % | ||||||
| Home equity and second mortgages | 5.14 | % | 5.14 | % | 4.83 | % | 4.77 | % | 4.54 | % | ||||||
| Commercial loans | 5.59 | % | 5.53 | % | 5.34 | % | 5.01 | % | 4.89 | % | ||||||
| Consumer loans | 6.91 | % | 6.83 | % | 6.64 | % | 7.57 | % | 7.47 | % | ||||||
| Commercial equipment | 4.47 | % | 4.47 | % | 4.43 | % | 4.41 | % | 4.49 | % | ||||||
| Total Loans | 4.57 | % | 4.56 | % | 4.50 | % | 4.41 | % | 4.37 | % | ||||||
Balance Sheet
Total assets increased $270.4 million, or 19.2%, to $1.7 billion at 2018Q3 compared to total assets of $1.4 billion at 2017Q4 primarily as a result of the acquisition of County First as well as organic retail deposit growth in the second and third quarters of 2018. Cash and cash equivalents increased $56.2 million, or 364.4%, to $71.6 million and total securities increased $42.3 million, or 25.2%, to $209.8 million. Gross loans increased 13.7% or $157.7 million from $1,150.0 million at 2017Q4 to $1,307.7 million at 2018Q3, primarily due to the merger.
The acquisition of County First led to a shift in the composition of the loan portfolios during 2018 compared to 2017Q4. The overall increase in the commercial real estate portfolio from 63.25% at 2017Q4 to 64.84% at 2018Q3 should increase asset sensitivity over time. The relative decrease in residential first mortgage balances should also increase asset interest rate sensitivity in a rising rate environment. Regulatory concentrations for non-owner occupied commercial real estate and construction decreased from 309.6% and 65.5% at 2017Q4 to 303.7% and 64.9% at 2018Q3. The following is a breakdown of the Company’s loan portfolios at September 30, 2018 and December 31, 2017:
| (Unaudited) | * | |||||||||||||||||
| BY LOAN TYPE | September 30, 2018 | % | December 31, 2017 | % | $ Change | % Change | ||||||||||||
| Commercial real estate | $ | 847,945 | 64.84 | % | $ | 727,314 | 63.25 | % | $ | 120,631 | 16.59 | % | ||||||
| Residential first mortgages | 156,565 | 11.97 | % | 170,374 | 14.81 | % | (13,809 | ) | -8.11 | % | ||||||||
| Residential rentals | 125,383 | 9.59 | % | 110,228 | 9.58 | % | 15,155 | 13.75 | % | |||||||||
| Construction and land development | 28,788 | 2.20 | % | 27,871 | 2.42 | % | 917 | 3.29 | % | |||||||||
| Home equity and second mortgages | 36,360 | 2.78 | % | 21,351 | 1.86 | % | 15,009 | 70.30 | % | |||||||||
| Commercial loans | 62,083 | 4.75 | % | 56,417 | 4.91 | % | 5,666 | 10.04 | % | |||||||||
| Consumer loans | 730 | 0.06 | % | 573 | 0.05 | % | 157 | 27.40 | % | |||||||||
| Commercial equipment | 49,883 | 3.81 | % | 35,916 | 3.12 | % | 13,967 | 38.89 | % | |||||||||
| Gross loans | 1,307,737 | 100.00 | % | 1,150,044 | 100.00 | % | 157,693 | 13.71 | % | |||||||||
| Net deferred costs (fees) | 917 | 0.07 | % | 1,086 | 0.09 | % | (169 | ) | -15.56 | % | ||||||||
| Total loans, net of deferred costs | $ | 1,308,654 | $ | 1,151,130 | $ | 157,524 | 13.68 | % | ||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||
The Company is encouraged by a strong loan pipeline of approximately $140 million at September 30, 2018. During the third quarter, gross loans increased $17.3 million or at a 5.4% annualized rate. The following is a breakdown of growth by portfolio from 2018Q2 to 2018Q3.
| Quarter Growth | |||||||||||||
| Annualized | |||||||||||||
| (dollars in thousands) | September 30, 2018 | June 30, 2018 | $ Change | % Change | |||||||||
| Commercial real estate | $ | 847,945 | $ | 828,445 | $ | 19,500 | 9.42 | % | |||||
| Residential first mortgages | 156,565 | 163,090 | (6,525 | ) | -16.00 | % | |||||||
| Residential rentals | 125,383 | 127,469 | (2,086 | ) | -6.55 | % | |||||||
| Construction and land development | 28,788 | 28,647 | 141 | 1.97 | % | ||||||||
| Home equity and second mortgages | 36,360 | 37,026 | (666 | ) | -7.19 | % | |||||||
| Commercial loans | 62,083 | 57,519 | 4,564 | 31.74 | % | ||||||||
| Consumer loans | 730 | 801 | (71 | ) | -35.46 | % | |||||||
| Commercial equipment | 49,883 | 47,418 | 2,465 | 20.79 | % | ||||||||
| $ | 1,307,737 | $ | 1,290,415 | $ | 17,322 | 5.37 | % | ||||||
During the third quarter growth in the non-acquired loan portfolios increased $25.7 million or an 8.8% annualized rate. Year to date the Bank’s non-acquired loan portfolios increased $47.0 million or 5.5% annualized from $1,150.0 million at 2017Q4 to $1,197.0 million at 2018Q3. The following is a breakdown of the Company’s non-acquired loan portfolios at September 30, 2018, December 31, 2017 and June 30, 2018:
| YTD Growth | Quarter Growth | ||||||||||||||||||||||
| Non-Acquired Loan Portfolios | Annualized | Annualized | |||||||||||||||||||||
| (dollars in thousands) | September 30, 2018 | December 31, 2017 | $ Change | % Change | June 30, 2018 | $ Change | % Change | ||||||||||||||||
| Commercial real estate | $ | 780,236 | $ | 727,314 | $ | 52,922 | 9.70 | % | $ | 756,451 | $ | 23,785 | 12.58 | % | |||||||||
| Residential first mortgages | 156,097 | 170,374 | (14,277 | ) | -11.17 | % | 162,621 | (6,524 | ) | -16.05 | % | ||||||||||||
| Residential rentals | 105,662 | 110,228 | (4,566 | ) | -5.52 | % | 106,967 | (1,305 | ) | -4.88 | % | ||||||||||||
| Construction and land development | 28,260 | 27,871 | 389 | 1.86 | % | 27,611 | 649 | 9.40 | % | ||||||||||||||
| Home equity and second mortgages | 21,870 | 21,351 | 519 | 3.24 | % | 21,334 | 536 | 10.05 | % | ||||||||||||||
| Commercial loans | 59,200 | 56,417 | 2,783 | 6.58 | % | 53,853 | 5,347 | 39.72 | % | ||||||||||||||
| Consumer loans | 514 | 573 | (59 | ) | -13.73 | % | 564 | (50 | ) | -35.46 | % | ||||||||||||
| Commercial equipment | 45,245 | 35,916 | 9,329 | 34.63 | % | 42,018 | 3,227 | 30.72 | % | ||||||||||||||
| $ | 1,197,084 | $ | 1,150,044 | $ | 47,040 | 5.45 | % | $ | 1,171,419 | $ | 25,665 | 8.76 | % | ||||||||||
Loans consist of, (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $47.0 million, or 4.1%, to $1,197.1 million; (ii) acquired performing loans were $107.1 million; and (iii) purchase credit impaired (“PCI”) loans were $3.5 million. At 2018Q3 acquired performing loans, which totaled $107.1 million, included a $2.0 million net acquisition accounting fair market value adjustment, representing a 1.83% “mark;” and PCI loans which totaled $3.5 million, included a $671,000 adjustment, representing a 16.04% “mark.”
Total deposits increased $346.1 million, or 31.3%, to $1,452.4 million at 2018Q3, compared to $1,106.2 million at 2017Q4. During the same period, noninterest bearing demand deposits increased $57.3 million, or 35.9%, to $217.2 million (15.0% of total deposits). Transaction deposit accounts increased $355.9 million from $654.6 million (59% of deposits) at 2017Q4 to $1,010.5 million (70% of deposits) at 2018Q3. Reciprocal deposits4 are used to maximize FDIC insurance available to our customers. Reciprocal deposits increased $135.2 million or 145.5% to $228.1 million at 2018Q3 compared to $92.9 million at 2017Q4.
At 2018Q3 total deposits consisted of $1,394.2 million in retail deposits and $58.2 million in brokered deposits. Retail deposits have increased $407.0 million from $987.2 million at 2017Q4 to $1,394.2 million at 2018Q3. During the first quarter of 2018, the Bank increased retail deposits $188.7 million, primarily as a result of the County First acquisition. During the second and third quarters of 2018 organic transaction deposit growth was $218.3 million. The success in retail deposit growth and the increased liquidity the Bank has experienced in the second and third quarters was largely due to the acquisition of municipal relationships. Municipal accounts include treasury and cash management services with blended funding as well as other services and products such as payroll, lock box services, positive pay, automated clearing house transactions, etc. The diversity of products and services safeguard the stability of the relationships. Most of the municipal relationships’ balances are maintained in reciprocal deposits. To ensure available liquidity the Company has enhanced procedures to track and manage municipal deposit concentrations and seasonal balance fluctuations.
At 2018Q3 the Company has on-balance sheet liquidity of $179.6 million, which consists of cash and cash equivalents and available for sale (“AFS”) securities. The Company generally does not pledge AFS securities. The Company has $232.3 million in FHLB available lines at September 30, 2018, which does not include any pledged AFS securities. In addition, there was $50.1 million in unpledged held-to-maturity securities available for pledging.
The Company uses brokered deposits and other wholesale funding to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes. Brokered deposits have decreased $60.9 million or 51.2% to $58.1 million at 2018Q3 compared to $119.0 million at 2017Q4. Federal Home Loan Bank (“FHLB”) long-term debt and short-term borrowings (“advances”) decreased $117.5 million, or 82.2%, to $25.5 million at 2018Q3 compared to $143.0 million at 2017Q4. Wholesale funding, which includes brokered deposits and FHLB advances, decreased $178.4 million from $261.9 million (18.7% of assets) at 2017Q4 to $83.6 million (5.0% of assets) at 2018Q3. Cash and the sale of securities from the County First acquisition during the first quarter and the retail deposit growth in the second and third quarters were used to pay down debt and brokered deposits.
Total stockholders’ equity increased $40.1 million, or 36.6%, to $150.1 million at 2018Q3 compared to $110.0 million at 2017Q4. This increase primarily resulted from the issuance of 918,526 shares of common stock, valued at $35.6 million (based on the $38.78 per share closing price), as the stock component of the merger consideration paid in the County First acquisition. In addition, stockholders’ equity increased due to net income of $7.4 million and net stock related activities in connection with stock-based compensation and ESOP activity of $297,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $1.6 million, an increase in accumulated other comprehensive losses of $1.5 million and repurchases of common stock of $67,000. The Company’s ratio of tangible common equity to tangible assets increased to 8.21% at 2018Q3 from 7.82% at 2017Q45. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.30% at 2018Q3 compared to 9.51% at 2017Q4. The Company remains well capitalized at September 30, 2018 with a Tier 1 capital to average assets (leverage ratio) of 9.51% at 2018Q3 compared to 8.79% at 2017Q4.
Asset Quality
Non-accrual loans and OREO to total assets increased from 1.00% at 2017Q4 to 1.46% at 2018Q3. Non-accrual loans, OREO and TDRs to total assets increased from 1.71% at 2017Q4 to 2.05% at 2018Q3. The increase in non-accruals during 2018, was primarily the result of one well-secured classified relationship of $10.3 million that was placed on non-accrual during the second quarter of 2018.
Classified assets decreased $12.9 million from $50.3 million at 2017Q4 to $37.4 million at 2018Q3. Management considers classified assets to be an important measure of asset quality. The following is a breakdown of the Company’s classified and special mention assets at September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, 2016, 2015 and 2014, respectively:
| Classified Assets and Special Mention Assets | |||||||||||||||||||||||||||||
| (dollars in thousands) | As of 09/30/2018 | As of 06/30/2018 | As of 03/31/2018 | As of 12/31/2017 | As of 12/31/2016 | As of 12/31/2015 | As of 12/31/2014 | ||||||||||||||||||||||
| Classified loans | |||||||||||||||||||||||||||||
| Substandard | $ | 28,640 | $ | 34,559 | $ | 34,772 | $ | 40,306 | $ | 30,463 | $ | 31,943 | $ | 46,735 | |||||||||||||||
| Doubtful | - | 103 | - | - | 137 | 861 | - | ||||||||||||||||||||||
| Loss | - | - | - | - | - | - | - | ||||||||||||||||||||||
| Total classified loans | 28,640 | 34,662 | 34,772 | 40,306 | 30,600 | 32,804 | 46,735 | ||||||||||||||||||||||
| Special mention loans | - | 854 | 2,033 | 96 | - | 1,642 | 5,460 | ||||||||||||||||||||||
| Total classified and special mention loans | $ | 28,640 | $ | 35,516 | $ | 36,805 | $ | 40,402 | $ | 30,600 | $ | 34,446 | $ | 52,195 | |||||||||||||||
| Classified loans | 28,640 | 34,662 | 34,772 | 40,306 | 30,600 | 32,804 | 46,735 | ||||||||||||||||||||||
| Classified securities | 522 | 569 | 612 | 651 | 883 | 1,093 | 1,404 | ||||||||||||||||||||||
| Other real estate owned | 8,207 | 8,305 | 9,352 | 9,341 | 7,763 | 9,449 | 5,883 | ||||||||||||||||||||||
| Total classified assets | $ | 37,369 | $ | 43,536 | $ | 44,736 | $ | 50,298 | $ | 39,246 | $ | 43,346 | $ | 54,022 | |||||||||||||||
| Total classified assets as a percentage of total assets | 2.23 | % | 2.74 | % | 2.84 | % | 3.58 | % | 2.94 | % | 3.79 | % | 4.99 | % | |||||||||||||||
| Total classified assets as a percentage of Risk Based Capital | 20.12 | % | 23.88 | % | 24.81 | % | 32.10 | % | 26.13 | % | 30.19 | % | 39.30 | % | |||||||||||||||
The Company reported a $40,000 provision for loan loss expense in 2018Q3 compared to $400,000 in 2018Q2, $500,000 in 2018Q1, and a provision of $224,000 in 2017Q3. Allowance for loan loss levels decreased to 0.82% of total loans at 2018Q3 compared to 0.91% at 2017Q4 due to the addition of County First loans for which no allowance was provided in accordance with purchase accounting standards. Net charge-offs of $26,000, $146,000 and $544,000 were recognized in 2018Q3, 2018Q2 and 2018Q1, respectively, compared to net charge-offs of $223,000, $51,000 and $131,000 in 2017Q3, 2017Q2 and 2017Q1, respectively. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral and other relevant factors that, in management’s judgment, warrant recognition in determining an adequate allowance. Improvements to baseline charge-off factors for the periods used to evaluate the adequacy of the allowance as well as improvements in some qualitative factors, such as slower portfolio growth and improvement in classified assets, were offset by increases in other qualitative factors, such as increased commercial real estate concentrations. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.
Net Income
The Company reported net income for 2018Q3 of $3.9 million or diluted earnings per share of $0.70 compared to net income of $2.8 million or $0.60 per diluted share for 2017Q3. The third quarter results included merger and acquisition costs net of tax of $8,000 and net of tax of $257,000 for the comparative quarters. The impact of merger and acquisition costs resulted in no change to quarterly earnings per share for 2018Q3 and a reduction of approximately $0.06 for 2017Q3. The Company’s ROAA and return on average common equity ROACE were 0.96% and 10.29% in 2018Q3 compared to 0.80% and 9.99% in 2017Q3.
Net income for 2018YTDQ3 was $7.4 million or $1.34 per diluted share compared to net income of $7.7 million or $1.65 per diluted share for 2017YTDQ3. The first nine months results included merger and acquisition costs net of tax of $2.7 million and net of tax of $494,000 for the respective periods. The impact of merger and acquisition costs resulted in a reduction to nine-month earnings per share of approximately $0.48 for 2018YTDQ3 and $0.11 for 2017YTDQ3. The Company’s ROAA and ROACE were 0.62% and 6.68% in 2018YTDQ3 compared to 0.75% and 9.38% in 2017YTDQ3.
The current year decrease in net income compared to the prior year was primarily due to merger-related costs, which included termination costs of County First’s core processing contract as well as investment banking fees, legal fees and the costs of employee agreements and severance for terminations. In addition, the Company will continue to carry additional noninterest expense in the second half of 2018 until the remaining duplicate vendors and processes are discontinued. The increase in noninterest expense was partially offset by an increase in net interest income realized from the integrated operations of County First and from a lower effective tax rate.
The Company reported operating net income, which excludes merger-related expenses, of $3.9 million, or $0.70 per share, in 2018Q3. This compares to operating net income of $3.0 million, or $0.66 per share, in 2017Q3. 2018Q3 operating net income reflects lower merger and acquisition costs, higher net interest income partially offset by higher noninterest expense associated with the acquisition of County First.
The Company reported operating net income of $10.1 million, or $1.82 per share, in 2018YTDQ3. This compares to operating net income of $8.2 million, or $1.76 per share, in 2017YTDQ3. 2018YTDQ3 operating net income reflects higher net interest income partially offset by higher noninterest expense associated with the acquisition of County First. During the third quarter of 2018, the anticipated cost savings from the acquisition began to be realized. The Company’s 2018Q3 expense run rate was $8.5 million and was positively impacted by the second quarter branch closures and reduced employee headcount. The Company’s expected expense run rate for the third and fourth quarters was projected between $8.4 million to $8.6 million.
Net Interest Income
Net interest income increased 15.9% or $1.8 million to $12.8 million in 2018Q3 compared to $11.0 million in 2017Q3. Net interest margin at 3.43% in 2018Q3 increased five basis points from 3.38% in 2017Q3. Average interest-earning assets were $1,487.9 million for the third quarter of 2018, an increase of $183.9 million or 14.1%, compared to $1,304.0 million for the same quarter of 2017.
Net interest income increased 16.7% or $5.5 million to $38.1 million in 2018YTDQ3 compared to $32.6 million in 2017YTDQ3. Net interest margin at 3.46% in 2018YTDQ3 increased seven basis points from 3.39% in 2017YTDQ3. Average interest-earning assets were $1,467.6 million for the first nine months of 2018, an increase of $185.2 million or 14.4%, compared to $1,282.4 million for the first nine months of 2017.
Net interest margin increased during the comparable periods as the volume of higher yielding assets more than offset the increased cost of funds. For the nine months ended September 30, 2018, the below table provides information on the impact of changes in volume and rate:
| For the Nine Months Ended September 30, 2018 | |||||||||||
| compared to the Nine Months Ended | |||||||||||
| September 30, 2017 | |||||||||||
| Due to | |||||||||||
| dollars in thousands | Volume | Rate | Total | ||||||||
| Interest income: | |||||||||||
| Loan portfolio (1) | $ | 5,759 | $ | 1,484 | $ | 7,243 | |||||
| Investment securities, federal funds | |||||||||||
| sold and interest bearing deposits | 387 | 504 | 891 | ||||||||
| Total interest-earning assets | $ | 6,146 | $ | 1,988 | $ | 8,134 | |||||
| Interest-bearing liabilities: | |||||||||||
| Savings | 12 | 12 | 24 | ||||||||
| Interest-bearing demand and money | |||||||||||
| market accounts | 594 | 765 | 1,359 | ||||||||
| Certificates of deposit | 157 | 1,422 | 1,579 | ||||||||
| Long-term debt | (350 | ) | 76 | (274 | ) | ||||||
| Short-term debt | (530 | ) | 438 | (92 | ) | ||||||
| Subordinated notes | - | - | - | ||||||||
| Guaranteed preferred beneficial interest | |||||||||||
| in junior subordinated debentures | - | 91 | 91 | ||||||||
| Total interest-bearing liabilities | $ | (117 | ) | $ | 2,804 | $ | 2,687 | ||||
| Net change in net interest income | $ | 6,263 | $ | (816 | ) | $ | 5,447 | ||||
| (1) Average balance includes non-accrual loans | |||||||||||
The increase in transaction accounts with the acquisition of County First, as well as organic transaction deposit growth in the first nine months of 2018 helped control the increase in deposit costs. Brokered deposits and FHLB advances were paid down $178.4 million in the first nine months of 2018 and replaced with retail deposits. Retail deposits, which include all deposits except brokered deposits, increased $407.0 million or 41.2% from $987.2 million at December 31, 2017 to $1,394.2 million at September 30, 2018.
Wholesale and time-based funding rates are typically more sensitive to rising interest rates than transactional deposits. Compared to 2017Q3 and 2017YTDQ3, average interest rates on certificates of deposits in 2018 increased by 52 basis points in 2018Q3 and 43 basis points in 2018YTDQ3 to 1.55% and 1.38%, respectively. During the same comparable periods, interest-bearing transactional deposits increased by 30 basis points and 22 basis points to 0.65% and 0.53%, respectively. The Company’s increases in transaction deposits during the last twelve months have decreased downward pressure on net interest margin. The ability to increase transaction deposits faster than wholesale funding could mitigate possible downward pressure on net interest margin in a rising rate environment. During 2018, the increase in reciprocal deposits have come at a lower funding costs than wholesale funding and in-market time deposits. Reciprocal deposits are more exposed to interest rate sensitivity in rising rate environments than other retail funding sources and the Company will manage the mix of total reciprocal deposit balances to mitigate interest rate risk exposures.
Noninterest Income and Noninterest Expense
Noninterest income of $1.1 million in 2018Q3 decreased by $87,000 compared to $1.2 million in 2017Q3. The decrease in noninterest income was primarily due to gains on loans held for sale of $294,000 sold in the third quarter of 2017. The decrease to non-interest income was partially offset by increases in service charge and miscellaneous income of $184,000 due to the larger customer base resulting from the acquisition of County First. In addition, Bank Owned Life Insurance acquired in the County First transaction of approximately $6.3 million increased non-interest income by $31,000 compared to the prior comparable period.
Noninterest income was essentially flat at $3.0 million in 2018YTDQ3 and 2017YTDQ3. The small decrease of $46,000 for the comparable periods was primarily due to gains on loans held for sale of $294,000 sold in the third quarter of 2017, gains on the sale of investment securities sold in 2017Q3 of $133,000 and the recognition in 2018YTDQ3 of unrealized losses on equity securities of $86,000 due to a new accounting standard effective in the first quarter of 2018 that requires recognition of changes in the fair value flow through the Company’s statement of income. These decreases to non-interest income were partially offset by increases in service charge and miscellaneous income of $417,000 due to a larger customer base with the acquisition of County First.
Noninterest expenses increased $1.1 million, or 14.1%, to $8.5 million in 2018Q3 compared to $7.4 million in 2017Q3, and decreased $1.3 million, or 12.9%, compared to $9.7 million in 2018Q2. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $1.4 million, or 20.2%, to $8.3 million in 2018Q3 compared to $6.9 million in 2017Q3, and decreased $455,000, or 5.2%, compared to $8.8 million in 2018Q2. Overall the increases in adjusted noninterest expenses comparing 2018Q3 to 2017Q3 were due primarily to increases in salary and employee benefits due to the addition of County First employees. Other increases from the comparable periods were due to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were due primarily to the acquisition of County First. The Company closed four of the five acquired branches in May 2018. All three of the held for sale County First branches were sold in the first nine months of 2018. The Company’s 2018Q3 expense run rate was $8.5 million and was positively impacted by the second quarter branch closures and reduced employee headcount. The Company’s expected expense run rate for the third and fourth quarters was projected to be between $8.4 million and $8.6 million.
The Company’s GAAP efficiency ratio was 61.40% in 2018Q3 compared to 61.18% in 2017Q3 and 73.23% in 2018Q2. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 60.09% and 56.88% and 65.51% for the same comparable periods. The decrease in the operating efficiency ratio between the second and third quarter of 2018 was primarily due to increased net interest income and a reduction in the Company’s expenses run rate. The Company’s GAAP net operating expense ratio was 1.85% in 2018Q3 compared to 1.80% in 2017Q3 and 2.24% in 2018Q2. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.80% and 1.65% and 1.97% for the same comparable periods.
The following is a summary breakdown of noninterest expense:
| Three Months Ended September 30, | ||||||||||||||
| (dollars in thousands) | 2018 | 2017 | $ Change | % Change | ||||||||||
| Salary and employee benefits | $ | 4,739 | $ | 4,056 | 683 | 16.8 | % | |||||||
| OREO Valuation Allowance and Expenses | 165 | 283 | (118 | ) | (41.7 | %) | ||||||||
| Merger and acquisition costs | 11 | 239 | (228 | ) | (95.4 | %) | ||||||||
| Operating Expenses | 3,577 | 2,864 | 713 | 24.9 | % | |||||||||
| Total Noninterest Expense | $ | 8,492 | $ | 7,442 | $ | 1,050 | 14.1 | % | ||||||
| Three Months Ended | ||||||||||||||
| (dollars in thousands) | September 30, 2018 | June 30, 2018 | $ Change | % Change | ||||||||||
| Salary and employee benefits | $ | 4,739 | $ | 5,129 | $ | (390 | ) | (7.6 | %) | |||||
| OREO Valuation Allowance and Expenses | 165 | 229 | (64 | ) | (27.9 | %) | ||||||||
| Merger and acquisition costs | 11 | 741 | (730 | ) | (98.5 | %) | ||||||||
| Operating Expenses | 3,577 | 3,642 | (65 | ) | (1.8 | %) | ||||||||
| Total Noninterest Expense | $ | 8,492 | $ | 9,741 | $ | (1,249 | ) | (12.8 | %) | |||||
Noninterest expenses increased $7.6 million, or 34.0%, to $29.9 million in 2018YTDQ3 compared to $22.3 million in 2017YTDQ3. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $4.6 million, or 21.4%, to $25.8 million in 2018YTDQ3 compared to $21.2 million in 2017YTDQ3. Overall the increases in adjusted noninterest expenses comparing 2018YTDQ3 to 2017YTDQ3 were due primarily to increases in salary and employee benefits due to the addition of County First employees. Other increases from the comparable periods were to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were due primarily to the acquisition of County First.
The Company’s GAAP efficiency ratio was 72.83% in 2018YTDQ3 compared to 62.57% in 2017YTDQ3. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 62.63% and 59.84% for the same comparable periods. The Company’s GAAP net operating expense ratio was 2.26% in 2018YTDQ3 compared to 1.88% in 2017YTDQ3. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.90% and 1.79% for the same comparable periods. The slight increase in the non-GAAP net operating expense ratios in 2018 reflects the costs associated with the duplication of systems and resources to integrate County First during 2018. The following is a summary breakdown of noninterest expense:
| Nine Months Ended September 30, | |||||||||||||
| (dollars in thousands) | 2018 | 2017 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 14,915 | $ | 12,567 | $ | 2,348 | 18.7 | % | |||||
| OREO Valuation Allowance and Expenses | 516 | 587 | (71 | ) | (12.1 | %) | |||||||
| Merger and acquisition costs | 3,620 | 494 | 3,126 | 632.8 | % | ||||||||
| Operating Expenses | 10,857 | 8,667 | 2,190 | 25.3 | % | ||||||||
| Total Noninterest Expense | $ | 29,908 | $ | 22,315 | $ | 7,593 | 34.0 | % | |||||
About The Community Financial Corporation - Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $1.6 billion. Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company’s banking centers are located at its main office in Waldorf, Maryland, and branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and downtown Fredericksburg, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.
Use of non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
Forward-looking Statements - This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements include, without limitation, those relating to the Company’s and Community Bank of the Chesapeake’s future growth and management’s outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or other future financial or business performance strategies or expectations, and any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to the County First acquisition; plans and cost savings regarding branch closings or consolidation; any statement of expectation or belief; projections related to certain financial metrics; and any statement of assumptions underlying the foregoing. These forward-looking statements express management’s current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: the synergies and other expected financial benefits from the County First acquisition may not be realized within the expected time frames; costs or difficulties related to integration matters might be greater than expected; general economic trends; changes in interest rates; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate value and the real estate market; regulatory changes; the possibility of unforeseen events affecting the industry generally; the uncertainties associated with newly developed or acquired operations; the outcome of litigation that may arise; market disruptions and other effects of terrorist activities; and the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2017, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.
Data is unaudited as of September 30, 2018. This selected information should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
CONTACTS:
William J. Pasenelli, Chief Executive Officer
Todd L. Capitani, Chief Financial Officer
888.745.2265
1 Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.
Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.
2 The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017. Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See non-GAAP reconciliation schedules.
3 The Company maintains GAAP and non-GAAP measures for net operating expenses and noninterest expenses to calculate non-GAAP ratios. Adjusted net operating expense and adjusted noninterest expense exclude merger and acquisition costs, OREO gains and losses and expenses, and gains and losses on the sale of investments and other assets not considered part of recurring operations. See Reconciliation of GAAP and non-GAAP financial measures for the calculation of the below ratios:
Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.
Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.
4 Under the Federal Deposit Insurance Act reciprocal deposits are now considered core deposits and are no longer considered brokered deposits unless they exceed 20% of a bank’s liabilities or $5.0 billion.
5 The Company had no intangible assets prior to January 1, 2018. Therefore, tangible common equity and tangible assets were the same as common equity and total assets.
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2017 | 2018 | 2017 | ||||||||||
| Interest and Dividend Income | ||||||||||||||
| Loans, including fees | $ | 15,085 | $ | 12,671 | $ | 44,294 | $ | 37,051 | ||||||
| Interest and dividends on investment securities | 1,311 | 988 | 3,617 | 2,907 | ||||||||||
| Interest on deposits with banks | 88 | 21 | 220 | 39 | ||||||||||
| Total Interest and Dividend Income | 16,484 | 13,680 | 48,131 | 39,997 | ||||||||||
| Interest Expense | ||||||||||||||
| Deposits | 2,835 | 1,564 | 7,196 | 4,234 | ||||||||||
| Short-term borrowings | 142 | 304 | 642 | 734 | ||||||||||
| Long-term debt | 746 | 804 | 2,231 | 2,414 | ||||||||||
| Total Interest Expense | 3,723 | 2,672 | 10,069 | 7,382 | ||||||||||
| Net Interest Income | 12,761 | 11,008 | 38,062 | 32,615 | ||||||||||
| Provision for loan losses | 40 | 224 | 940 | 980 | ||||||||||
| Net Interest Income After Provision For Loan Losses | 12,721 | 10,784 | 37,122 | 31,635 | ||||||||||
| Noninterest Income | ||||||||||||||
| Loan appraisal, credit, and miscellaneous charges | 81 | 28 | 141 | 84 | ||||||||||
| Gain on sale of assets | - | - | 1 | 47 | ||||||||||
| Net gains on sale of investment securities | - | - | - | 133 | ||||||||||
| Unrealized gains (losses) on equity securities | (8 | ) | - | (86 | ) | - | ||||||||
| Income from bank owned life insurance | 227 | 196 | 677 | 581 | ||||||||||
| Service charges | 770 | 639 | 2,269 | 1,909 | ||||||||||
| Gain on sale of loans held for sale | - | 294 | - | 294 | ||||||||||
| Total Noninterest Income | 1,070 | 1,157 | 3,002 | 3,048 | ||||||||||
| Noninterest Expense | ||||||||||||||
| Salary and employee benefits | 4,739 | 4,056 | 14,915 | 12,567 | ||||||||||
| Occupancy expense | 744 | 630 | 2,249 | 1,941 | ||||||||||
| Advertising | 165 | 156 | 504 | 404 | ||||||||||
| Data processing expense | 769 | 555 | 2,234 | 1,766 | ||||||||||
| Professional fees | 442 | 510 | 1,220 | 1,190 | ||||||||||
| Merger and acquisition costs | 11 | 239 | 3,620 | 494 | ||||||||||
| Depreciation of premises and equipment | 207 | 191 | 608 | 594 | ||||||||||
| Telephone communications | 62 | 46 | 230 | 142 | ||||||||||
| Office supplies | 31 | 26 | 112 | 86 | ||||||||||
| FDIC Insurance | 185 | 178 | 496 | 505 | ||||||||||
| OREO valuation allowance and expenses | 165 | 283 | 516 | 587 | ||||||||||
| Core deposit intangible amortization | 193 | - | 597 | - | ||||||||||
| Other | 779 | 572 | 2,607 | 2,039 | ||||||||||
| Total Noninterest Expense | 8,492 | 7,442 | 29,908 | 22,315 | ||||||||||
| Income before income taxes | 5,299 | 4,499 | 10,216 | 12,368 | ||||||||||
| Income tax expense | 1,441 | 1,717 | 2,802 | 4,701 | ||||||||||
| Net Income | $ | 3,858 | $ | 2,782 | $ | 7,414 | $ | 7,667 | ||||||
| Earnings Per Common Share | ||||||||||||||
| Basic | $ | 0.70 | $ | 0.60 | $ | 1.34 | $ | 1.66 | ||||||
| Diluted | $ | 0.70 | $ | 0.60 | $ | 1.34 | $ | 1.65 | ||||||
| Cash dividends paid per common share | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
| THREE MONTHS ENDED | ||||||||||||||||||||
| Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE | ||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs and the fourth quarter 2017 income tax expense attributable to the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
| Net (loss) income (as reported) | $ | 3,858 | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | |||||||||
| Impact of Tax Cuts and Jobs Act | - | - | - | 2,740 | - | |||||||||||||||
| Merger and acquisition costs (net of tax) | 8 | 546 | 2,135 | 230 | 257 | |||||||||||||||
| Non-GAAP operating net income | $ | 3,866 | $ | 2,881 | $ | 3,356 | $ | 2,511 | $ | 3,039 | ||||||||||
| Income before income taxes (as reported) | $ | 5,299 | $ | 3,163 | $ | 1,754 | $ | 3,997 | $ | 4,499 | ||||||||||
| Merger and acquisition costs ("M&A") | 11 | 741 | 2,868 | 335 | 239 | |||||||||||||||
| Adjusted pretax income | 5,310 | 3,904 | 4,622 | 4,332 | 4,738 | |||||||||||||||
| Income tax expense | 1,444 | 1,023 | 1,266 | 1,821 | 1,699 | |||||||||||||||
| Non-GAAP operating net income | $ | 3,866 | $ | 2,881 | $ | 3,356 | $ | 2,511 | $ | 3,039 | ||||||||||
| GAAP diluted earnings per share ("EPS") | $ | 0.70 | $ | 0.42 | $ | 0.22 | $ | (0.10 | ) | $ | 0.60 | |||||||||
| Non-GAAP operating diluted EPS before M&A | $ | 0.70 | $ | 0.52 | $ | 0.61 | $ | 0.54 | $ | 0.66 | ||||||||||
| GAAP return on average assets ("ROAA') | 0.96 | % | 0.59 | % | 0.31 | % | -0.13 | % | 0.80 | % | ||||||||||
| Non-GAAP operating ROAA before M&A | 0.96 | % | 0.73 | % | 0.85 | % | 0.72 | % | 0.87 | % | ||||||||||
| GAAP return on average common equity ("ROACE") | 10.29 | % | 6.34 | % | 3.33 | % | -1.62 | % | 9.99 | % | ||||||||||
| Non-GAAP operating ROACE before M&A | 10.31 | % | 7.82 | % | 9.15 | % | 8.89 | % | 10.92 | % | ||||||||||
| Net income (as reported) | $ | 3,858 | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | |||||||||
| Weighted average common shares outstanding | 5,551,184 | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,417 | |||||||||||||||
| Average assets | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | ||||||||||
| Average equity | 150,013 | 147,295 | 146,712 | 113,017 | 111,357 | |||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||
| NINE MONTHS ENDED | ||||||||
| Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE | ||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | ||||||||
| (Unaudited) | (Unaudited) | |||||||
| (dollars in thousands, except per share amounts) | September 30, 2018 | September 30, 2017 | ||||||
| Net (loss) income (as reported) | $ | 7,414 | $ | 7,667 | ||||
| Impact of Tax Cuts and Jobs Act | - | - | ||||||
| Merger and acquisition costs (net of tax) | 2,689 | 494 | ||||||
| Non-GAAP operating net income | $ | 10,103 | $ | 8,161 | ||||
| Income before income taxes (as reported) | $ | 10,216 | $ | 12,368 | ||||
| Merger and acquisition costs ("M&A") | 3,620 | 494 | ||||||
| Adjusted pretax income | 13,836 | 12,862 | ||||||
| Income tax expense | 3,733 | 4,701 | ||||||
| Non-GAAP operating net income | $ | 10,103 | $ | 8,161 | ||||
| GAAP diluted earnings per share ("EPS") | $ | 1.34 | $ | 1.65 | ||||
| Non-GAAP operating diluted EPS before M&A | $ | 1.82 | $ | 1.76 | ||||
| GAAP return on average assets ("ROAA') | 0.62 | % | 0.75 | % | ||||
| Non-GAAP operating ROAA before M&A | 0.85 | % | 0.79 | % | ||||
| GAAP return on average common equity ("ROACE") | 6.68 | % | 9.38 | % | ||||
| Non-GAAP operating ROACE before M&A | 9.10 | % | 9.99 | % | ||||
| Net income (as reported) | $ | 7,414 | $ | 7,667 | ||||
| Weighted average common shares outstanding | 5,550,020 | 4,633,500 | ||||||
| Average assets | $ | 1,589,438 | $ | 1,369,583 | ||||
| Average equity | 148,022 | 108,956 | ||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||||||||||||||
| AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME | ||||||||||||||||||||||||||||||||||||
| UNAUDITED | ||||||||||||||||||||||||||||||||||||
| For the Three Months Ended September 30, | For the Three Months Ended | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | September 30, 2018 | June 30, 2018 | |||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||
| dollars in thousands | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | ||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
| Loan portfolio | $ | 1,279,242 | $ | 15,085 | $ | - | 4.72 | % | $ | 1,127,626 | $ | 12,671 | 4.49 | % | $ | 1,279,242 | $ | 15,085 | 4.72 | % | $ | 1,266,830 | $ | 14,482 | 4.57 | % | ||||||||||
| Investment securities, federal funds | ||||||||||||||||||||||||||||||||||||
| sold and interest-bearing deposits | 208,627 | 1,399 | 2.68 | % | 176,360 | 1,009 | 2.29 | % | 208,627 | 1,399 | 2.68 | % | 190,849 | 1,271 | 2.66 | % | ||||||||||||||||||||
| Total Interest-Earning Assets | 1,487,869 | 16,484 | 4.43 | % | 1,303,986 | 13,680 | 4.20 | % | 1,487,869 | 16,484 | 4.43 | % | 1,457,679 | 15,753 | 4.32 | % | ||||||||||||||||||||
| Cash and cash equivalents | 23,765 | 18,199 | 23,765 | 25,142 | ||||||||||||||||||||||||||||||||
| Goodwill | 10,604 | - | 10,604 | 10,280 | ||||||||||||||||||||||||||||||||
| Core deposit intangible | 3,120 | - | 3,120 | 3,316 | ||||||||||||||||||||||||||||||||
| Other assets | 81,495 | 74,274 | 81,495 | 83,228 | ||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,606,853 | $ | 1,396,459 | $ | 1,606,853 | $ | 1,579,645 | ||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
| Savings | $ | 73,114 | $ | 19 | 0.10 | % | $ | 55,125 | $ | 7 | 0.05 | % | $ | 73,114 | $ | 19 | 0.10 | % | $ | 74,470 | $ | 13 | 0.07 | % | ||||||||||||
| Interest-bearing demand and money | ||||||||||||||||||||||||||||||||||||
| market accounts | 611,039 | 1,093 | 0.72 | % | 429,847 | 412 | 0.38 | % | 611,039 | 1,093 | 0.72 | % | 550,872 | 796 | 0.58 | % | ||||||||||||||||||||
| Certificates of deposit | 445,081 | 1,723 | 1.55 | % | 443,048 | 1,144 | 1.03 | % | 445,081 | 1,723 | 1.55 | % | 458,801 | 1,594 | 1.39 | % | ||||||||||||||||||||
| Long-term debt | 34,696 | 242 | 2.79 | % | 58,019 | 352 | 2.43 | % | 34,696 | 242 | 2.79 | % | 37,560 | 226 | 2.41 | % | ||||||||||||||||||||
| Short-term debt | 26,870 | 142 | 2.11 | % | 96,908 | 304 | 1.25 | % | 26,870 | 142 | 2.11 | % | 45,824 | 217 | 1.89 | % | ||||||||||||||||||||
| Subordinated Notes | 23,000 | 360 | 6.26 | % | 23,000 | 359 | 6.24 | % | 23,000 | 360 | 6.26 | % | 23,000 | 359 | 6.24 | % | ||||||||||||||||||||
| Guaranteed preferred beneficial interest | - | - | - | - | ||||||||||||||||||||||||||||||||
| in junior subordinated debentures | 12,000 | 144 | 4.80 | % | 12,000 | 94 | 3.13 | % | 12,000 | 144 | 4.80 | % | 12,000 | 136 | 4.53 | % | ||||||||||||||||||||
| Total Interest-Bearing Liabilities | 1,225,800 | 3,723 | 1.21 | % | 1,117,947 | 2,672 | 0.96 | % | 1,225,800 | 3,723 | 1.21 | % | 1,202,527 | 3,341 | 1.11 | % | ||||||||||||||||||||
| Noninterest-bearing demand deposits | 216,580 | 156,746 | 216,580 | 216,968 | ||||||||||||||||||||||||||||||||
| Other liabilities | 14,460 | 10,409 | 14,460 | 12,855 | ||||||||||||||||||||||||||||||||
| Stockholders' equity | 150,013 | 111,357 | 150,013 | 147,295 | ||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,606,853 | $ | 1,396,459 | $ | 1,606,853 | $ | 1,579,645 | ||||||||||||||||||||||||||||
| Net interest income | $ | 12,761 | $ | 11,008 | $ | 12,761 | $ | 12,412 | ||||||||||||||||||||||||||||
| Interest rate spread | 3.22 | % | 3.24 | % | 3.22 | % | 3.21 | % | ||||||||||||||||||||||||||||
| Net yield on interest-earning assets | 3.43 | % | 3.38 | % | 3.43 | % | 3.41 | % | ||||||||||||||||||||||||||||
| Ratio of average interest-earning | ||||||||||||||||||||||||||||||||||||
| assets to average interest bearing | ||||||||||||||||||||||||||||||||||||
| liabilities | 121.38 | % | 116.64 | % | 121.38 | % | 121.22 | % | ||||||||||||||||||||||||||||
| Average loans to average deposits | 95.05 | % | 103.95 | % | 95.05 | % | 97.37 | % | ||||||||||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 66.93 | % | 59.16 | % | 66.93 | % | 64.74 | % | ||||||||||||||||||||||||||||
| Cost of funds | 1.03 | % | 0.84 | % | 1.03 | % | 0.94 | % | ||||||||||||||||||||||||||||
| Cost of deposits | 0.84 | % | 0.58 | % | 0.84 | % | 0.74 | % | ||||||||||||||||||||||||||||
| Cost of debt | 3.68 | % | 2.34 | % | 3.68 | % | 3.17 | % | ||||||||||||||||||||||||||||
| Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $161,000 and $152,000 of accretion interest for the three months ended September 30, 2018 and June 30, 2018, respectively. | ||||||||||||||||||||||||||||||||||||
| ** Transaction deposits exclude time deposits. | ||||||||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||
| AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME | |||||||||||||||||||
| UNAUDITED | |||||||||||||||||||
| For the Nine Months Ended September 30, | |||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||
| Average | Average | ||||||||||||||||||
| Average | Yield/ | Average | Yield/ | ||||||||||||||||
| dollars in thousands | Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||
| Assets | |||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||
| Loan portfolio | $ | 1,273,164 | $ | 44,294 | 4.64 | % | $ | 1,107,618 | $ | 37,051 | 4.46 | % | |||||||
| Investment securities, federal funds | |||||||||||||||||||
| sold and interest-bearing deposits | 194,440 | 3,837 | 2.63 | % | 174,813 | 2,946 | 2.25 | % | |||||||||||
| Total Interest-Earning Assets | 1,467,604 | 48,131 | 4.37 | % | 1,282,431 | 39,997 | 4.16 | % | |||||||||||
| Cash and cash equivalents | 24,978 | 14,555 | |||||||||||||||||
| Goodwill | 10,345 | - | |||||||||||||||||
| Core deposit intangible | 3,304 | - | |||||||||||||||||
| Other assets | 83,207 | 72,597 | |||||||||||||||||
| Total Assets | $ | 1,589,438 | $ | 1,369,583 | |||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||
| Savings | $ | 74,169 | $ | 44 | 0.08 | % | $ | 53,369 | $ | 20 | 0.05 | % | |||||||
| Interest-bearing demand and money | |||||||||||||||||||
| market accounts | 553,386 | 2,432 | 0.59 | % | 418,148 | 1,073 | 0.34 | % | |||||||||||
| Certificates of deposit | 457,621 | 4,720 | 1.38 | % | 442,410 | 3,141 | 0.95 | % | |||||||||||
| Long-term debt | 40,820 | 754 | 2.46 | % | 59,783 | 1,028 | 2.29 | % | |||||||||||
| Short-term debt | 49,560 | 642 | 1.73 | % | 90,460 | 734 | 1.08 | % | |||||||||||
| Subordinated Notes | 23,000 | 1,078 | 6.25 | % | 23,000 | 1,078 | 6.25 | % | |||||||||||
| Guaranteed preferred beneficial interest | |||||||||||||||||||
| in junior subordinated debentures | 12,000 | 399 | 4.43 | % | 12,000 | 308 | 3.42 | % | |||||||||||
| Total Interest-Bearing Liabilities | 1,210,556 | 10,069 | 1.11 | % | 1,099,170 | 7,382 | 0.90 | % | |||||||||||
| Noninterest-bearing demand deposits | 217,738 | 150,757 | |||||||||||||||||
| Other liabilities | 13,122 | 10,700 | |||||||||||||||||
| Stockholders' equity | 148,022 | 108,956 | |||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,589,438 | $ | 1,369,583 | |||||||||||||||
| Net interest income | $ | 38,062 | $ | 32,615 | |||||||||||||||
| Interest rate spread | 3.26 | % | 3.26 | % | |||||||||||||||
| Net yield on interest-earning assets | 3.46 | % | 3.39 | % | |||||||||||||||
| Ratio of average interest-earning | |||||||||||||||||||
| assets to average interest bearing | |||||||||||||||||||
| liabilities | 121.23 | % | 116.67 | % | |||||||||||||||
| Average loans to average deposits | 97.72 | % | 104.03 | % | |||||||||||||||
| Average transaction deposits to total average deposits ** | 64.88 | % | 58.45 | % | |||||||||||||||
| Cost of funds | 0.94 | % | 0.79 | % | |||||||||||||||
| Cost of deposits | 0.74 | % | 0.53 | % | |||||||||||||||
| Cost of debt | 3.06 | % | 2.27 | % | |||||||||||||||
| Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $635,000 of accretion interest during the nine months ended September 30, 2018. | |||||||||||||||||||
| ** Transaction deposits exclude time deposits. | |||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| (Unaudited) | * | ||||||||
| (dollars in thousands, except per share amounts) | September 30, 2018 | December 31, 2017 | |||||||
| Assets | |||||||||
| Cash and due from banks | $ | 26,718 | $ | 13,315 | |||||
| Federal funds sold | 36,099 | - | |||||||
| Interest-bearing deposits with banks | 8,778 | 2,102 | |||||||
| Securities available for sale (AFS), at fair value | 107,962 | 68,285 | |||||||
| Securities held to maturity (HTM), at amortized cost | 97,217 | 99,125 | |||||||
| Equity securities carried at fair value through income | 4,359 | - | |||||||
| Non-marketable equity securities held in other financial institutions | 249 | 121 | |||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 2,547 | 7,276 | |||||||
| Loans receivable | 1,308,654 | 1,151,130 | |||||||
| Less: allowance for loan losses | (10,739 | ) | (10,515 | ) | |||||
| Net loans | 1,297,915 | 1,140,615 | |||||||
| Goodwill | 10,708 | - | |||||||
| Premises and equipment, net | 22,433 | 21,391 | |||||||
| Other real estate owned (OREO) | 8,207 | 9,341 | |||||||
| Accrued interest receivable | 5,032 | 4,511 | |||||||
| Investment in bank owned life insurance | 36,071 | 29,398 | |||||||
| Core deposit intangible | 2,993 | - | |||||||
| Net deferred tax assets | 6,999 | 5,922 | |||||||
| Other assets | 2,122 | 4,559 | |||||||
| Total Assets | $ | 1,676,409 | $ | 1,405,961 | |||||
| Liabilities and Stockholders' Equity | |||||||||
| Liabilities | |||||||||
| Deposits | |||||||||
| Non-interest-bearing deposits | $ | 217,151 | $ | 159,844 | |||||
| Interest-bearing deposits | 1,235,220 | 946,393 | |||||||
| Total deposits | 1,452,371 | 1,106,237 | |||||||
| Short-term borrowings | 5,000 | 87,500 | |||||||
| Long-term debt | 20,451 | 55,498 | |||||||
| Guaranteed preferred beneficial interest in | |||||||||
| junior subordinated debentures (TRUPs) | 12,000 | 12,000 | |||||||
| Subordinated notes - 6.25% | 23,000 | 23,000 | |||||||
| Accrued expenses and other liabilities | 13,439 | 11,769 | |||||||
| Total Liabilities | 1,526,261 | 1,296,004 | |||||||
| Stockholders' Equity | |||||||||
| Common stock - par value $.01; authorized - 15,000,000 shares; | |||||||||
| issued 5,575,024 and 4,649,658 shares, respectively | 56 | 46 | |||||||
| Additional paid in capital | 84,246 | 48,209 | |||||||
| Retained earnings | 69,295 | 63,648 | |||||||
| Accumulated other comprehensive loss | (2,633 | ) | (1,191 | ) | |||||
| Unearned ESOP shares | (816 | ) | (755 | ) | |||||
| Total Stockholders' Equity | 150,148 | 109,957 | |||||||
| Total Liabilities and Stockholders' Equity | $ | 1,676,409 | $ | 1,405,961 | |||||
| * Derived from audited financial statements. | |||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA | |||||||||||||||||
| Three Months Ended (Unaudited) | Nine Months Ended (Unaudited) | ||||||||||||||||
| September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||
| KEY OPERATING RATIOS | |||||||||||||||||
| Return on average assets | 0.96 | % | 0.80 | % | 0.62 | % | 0.75 | % | |||||||||
| Return on average common equity | 10.29 | 9.99 | 6.68 | 9.38 | |||||||||||||
| Average total equity to average total assets | 9.34 | 7.97 | 9.31 | 7.96 | |||||||||||||
| Interest rate spread | 3.22 | 3.24 | 3.26 | 3.26 | |||||||||||||
| Net interest margin | 3.43 | 3.38 | 3.46 | 3.39 | |||||||||||||
| Cost of funds | 1.03 | 0.84 | 0.94 | 0.79 | |||||||||||||
| Cost of deposits | 0.84 | 0.58 | 0.74 | 0.53 | |||||||||||||
| Cost of debt | 3.68 | 2.34 | 3.06 | 2.27 | |||||||||||||
| Efficiency ratio | 61.40 | 61.18 | 72.83 | 62.57 | |||||||||||||
| Efficiency ratio - Non-GAAP** | 60.09 | 56.88 | 62.63 | 59.84 | |||||||||||||
| Non-interest expense to average assets | 2.11 | 2.13 | 2.51 | 2.17 | |||||||||||||
| Net operating expense to average assets | 1.85 | 1.80 | 2.26 | 1.88 | |||||||||||||
| Net operating exp. to average assets - Non-GAAP** | 1.80 | 1.65 | 1.90 | 1.79 | |||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 121.38 | 116.64 | 121.23 | 116.67 | |||||||||||||
| Net charge-offs to average loans | 0.01 | 0.08 | 0.07 | 0.05 | |||||||||||||
| COMMON SHARE DATA | |||||||||||||||||
| Basic net income per common share | $ | 0.70 | $ | 0.60 | $ | 1.34 | $ | 1.66 | |||||||||
| Diluted net income per common share | 0.70 | 0.60 | 1.34 | 1.65 | |||||||||||||
| Cash dividends paid per common share | 0.10 | 0.10 | 0.20 | 0.20 | |||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||
| Basic | 5,551,184 | 4,633,391 | 5,550,020 | 4,631,571 | |||||||||||||
| Diluted | 5,551,184 | 4,633,417 | 5,550,020 | 4,633,500 | |||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2018 | December 31, 2017 | $ Change | % Change | |||||||||||||
| ASSET QUALITY | |||||||||||||||||
| Total assets | $ | 1,676,409 | $ | 1,405,961 | $ | 270,448 | 19.2 | % | |||||||||
| Gross loans | 1,307,737 | 1,150,044 | 157,693 | 13.7 | |||||||||||||
| Classified Assets | 37,369 | 50,298 | (12,929 | ) | (25.7 | ) | |||||||||||
| Allowance for loan losses | 10,739 | 10,515 | 224 | 2.1 | |||||||||||||
| Past due loans - 31 to 89 days | 6,499 | 9,227 | (2,728 | ) | (29.6 | ) | |||||||||||
| Past due loans >=90 days | 9,666 | 2,483 | 7,183 | 289.3 | |||||||||||||
| Total past due (delinquency) loans | 16,165 | 11,710 | 4,455 | 38.0 | |||||||||||||
| Non-accrual loans (a) | 16,350 | 4,693 | 11,657 | 248.4 | |||||||||||||
| Accruing troubled debt restructures (TDRs) (b) | 9,839 | 10,021 | (182 | ) | (1.8 | ) | |||||||||||
| Other real estate owned (OREO) | 8,207 | 9,341 | (1,134 | ) | (12.1 | ) | |||||||||||
| Non-accrual loans, OREO and TDRs | $ | 34,396 | $ | 24,055 | $ | 10,341 | 43.0 | ||||||||||
| ASSET QUALITY RATIOS | |||||||||||||||||
| Classified assets to total assets | 2.23 | % | 3.58 | % | |||||||||||||
| Classified assets to risk-based capital | 20.12 | 32.10 | |||||||||||||||
| Allowance for loan losses to total loans | 0.82 | 0.91 | |||||||||||||||
| Allowance for loan losses to non-accrual loans | 65.68 | 224.06 | |||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.50 | 0.80 | |||||||||||||||
| Past due loans >=90 days to total loans | 0.74 | 0.22 | |||||||||||||||
| Total past due (delinquency) to total loans | 1.24 | 1.02 | |||||||||||||||
| Non-accrual loans to total loans | 1.25 | 0.41 | |||||||||||||||
| Non-accrual loans and TDRs to total loans | 2.00 | 1.28 | |||||||||||||||
| Non-accrual loans and OREO to total assets | 1.46 | 1.00 | |||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 2.05 | 1.71 | |||||||||||||||
| COMMON SHARE DATA | |||||||||||||||||
| Book value per common share | $ | 26.93 | $ | 23.65 | |||||||||||||
| Tangible book value per common share** | 24.47 | *** | |||||||||||||||
| Common shares outstanding at end of period | 5,575,024 | 4,649,658 | |||||||||||||||
| OTHER DATA | |||||||||||||||||
| Full-time equivalent employees | 190 | 165 | |||||||||||||||
| Branches (c) | 12 | 11 | |||||||||||||||
| Loan Production Offices | 5 | 5 | |||||||||||||||
| CAPITAL RATIOS | |||||||||||||||||
| Tier 1 capital to average assets | 9.51 | % | 8.79 | % | |||||||||||||
| Tier 1 common capital to risk-weighted assets | 10.30 | 9.51 | |||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.18 | 10.53 | |||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.67 | 13.40 | |||||||||||||||
| Common equity to assets | 8.96 | % | 7.82 | % | |||||||||||||
| Tangible common equity to tangible assets ** | 8.21 | % | *** | ||||||||||||||
| ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. | |||||||||||||||||
| *** The Company had no intangible assets before January 1, 2018. | |||||||||||||||||
| (a) Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments. | |||||||||||||||||
| (b) At September 30, 2018 and December 31, 2017, the Bank had total TDRs of $9.8 million and $10.8 million, respectively, with $0 and $769,000, respectively, in non-accrual status. These loans are classified as non-accrual loans for the calculation of financial ratios. | |||||||||||||||||
| (c) The Company closed four of the five acquired County First branches in May 2018. | |||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||||||||||
| Three Months Ended (Unaudited) | Nine Months Ended (Unaudited) | ||||||||||||||||
| September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||
| RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
| Efficiency ratio - GAAP basis | |||||||||||||||||
| Noninterest expense | $ | 8,492 | $ | 7,442 | $ | 29,908 | $ | 22,315 | |||||||||
| Net interest income plus noninterest income | 13,831 | 12,165 | 41,064 | 35,663 | |||||||||||||
| Efficiency ratio - GAAP basis | 61.40 | % | 61.18 | % | 72.83 | % | 62.57 | % | |||||||||
| Efficiency ratio - Non-GAAP basis | |||||||||||||||||
| Noninterest Expense | $ | 8,492 | $ | 7,442 | $ | 29,908 | $ | 22,315 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||
| Merger and acquisition costs | (11 | ) | (239 | ) | (3,620 | ) | (494 | ) | |||||||||
| OREO valuation allowance and expenses | (165 | ) | (283 | ) | (516 | ) | (587 | ) | |||||||||
| Noninterest expense - as adjusted | 8,316 | 6,920 | 25,772 | 21,234 | |||||||||||||
| Net interest income plus noninterest income | 13,831 | 12,165 | 41,064 | 35,663 | |||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||
| (Gains) losses on sale of asset | - | - | (1 | ) | (47 | ) | |||||||||||
| Net (gains) losses on sale of investment securities | - | - | - | (133 | ) | ||||||||||||
| Unrealized (gains) losses on equity securities | 8 | - | 86 | - | |||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 13,839 | $ | 12,165 | $ | 41,149 | $ | 35,483 | |||||||||
| Efficiency ratio -Non-GAAP basis | 60.09 | % | 56.88 | % | 62.63 | % | 59.84 | % | |||||||||
| Net operating exp. to average assets ratio - GAAP basis | |||||||||||||||||
| Average Assets | $ | 1,606,853 | $ | 1,396,459 | $ | 1,589,438 | $ | 1,369,583 | |||||||||
| Noninterest expense | 8,492 | 7,442 | 29,908 | 22,315 | |||||||||||||
| less: noninterest income | (1,070 | ) | (1,157 | ) | (3,002 | ) | (3,048 | ) | |||||||||
| Net operating exp. | $ | 7,422 | $ | 6,285 | $ | 26,906 | $ | 19,267 | |||||||||
| Net operating exp. to average assets - GAAP basis | 1.85 | % | 1.80 | % | 2.26 | % | 1.88 | % | |||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | |||||||||||||||||
| Average Assets | $ | 1,606,853 | $ | 1,396,459 | $ | 1,589,438 | $ | 1,369,583 | |||||||||
| Net operating exp. | 7,422 | 6,285 | 26,906 | 19,267 | |||||||||||||
| Non-GAAP adjustments noninterest expense: | |||||||||||||||||
| Merger and acquisition costs | (11 | ) | (239 | ) | (3,620 | ) | (494 | ) | |||||||||
| OREO valuation allowance and expenses | (165 | ) | (283 | ) | (516 | ) | (587 | ) | |||||||||
| Non-GAAP adjustments non interest income: | |||||||||||||||||
| Gains (losses) on sale of asset | - | - | 1 | 47 | |||||||||||||
| Net gains (losses) on sale of investment securities | - | - | - | 133 | |||||||||||||
| Unrealized gains (losses) on equity securities | (8 | ) | - | (86 | ) | - | |||||||||||
| Net operating exp.-adjusted | $ | 7,238 | $ | 5,763 | $ | 22,685 | $ | 18,366 | |||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.80 | % | 1.65 | % | 1.90 | % | 1.79 | % | |||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||||||||||||
| SUMMARY OF LOAN PORTFOLIO | |||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | * | (Unaudited) | |||||||||||||||||||||||||||
| BY LOAN TYPE | September 30, 2018 | % | June 30, 2018 | % | March 31, 2018 | % | December 31, 2017 | % | September 30, 2017 | % | |||||||||||||||||||||
| Commercial real estate | $ | 847,945 | 64.84 | % | $ | 828,445 | 64.20 | % | $ | 817,576 | 63.88 | % | $ | 727,314 | 63.25 | % | $ | 712,840 | 62.24 | % | |||||||||||
| Residential first mortgages | 156,565 | 11.97 | % | 163,090 | 12.64 | % | 166,390 | 13.00 | % | 170,374 | 14.81 | % | 175,816 | 15.35 | % | ||||||||||||||||
| Residential rentals | 125,383 | 9.59 | % | 127,469 | 9.88 | % | 129,026 | 10.08 | % | 110,228 | 9.58 | % | 110,905 | 9.68 | % | ||||||||||||||||
| Construction and land development | 28,788 | 2.20 | % | 28,647 | 2.22 | % | 28,226 | 2.21 | % | 27,871 | 2.42 | % | 31,094 | 2.71 | % | ||||||||||||||||
| Home equity and second mortgages | 36,360 | 2.78 | % | 37,026 | 2.87 | % | 39,481 | 3.09 | % | 21,351 | 1.86 | % | 22,334 | 1.95 | % | ||||||||||||||||
| Commercial loans | 62,083 | 4.75 | % | 57,519 | 4.46 | % | 52,198 | 4.08 | % | 56,417 | 4.91 | % | 56,376 | 4.92 | % | ||||||||||||||||
| Consumer loans | 730 | 0.06 | % | 801 | 0.06 | % | 853 | 0.07 | % | 573 | 0.05 | % | 541 | 0.05 | % | ||||||||||||||||
| Commercial equipment | 49,883 | 3.81 | % | 47,418 | 3.67 | % | 45,905 | 3.59 | % | 35,916 | 3.12 | % | 35,500 | 3.10 | % | ||||||||||||||||
| Gross loans | 1,307,737 | 100.00 | % | 1,290,415 | 100.00 | % | 1,279,655 | 100.00 | % | 1,150,044 | 100.00 | % | 1,145,406 | 100.00 | % | ||||||||||||||||
| Net deferred costs (fees) | 917 | 0.07 | % | 1,122 | 0.09 | % | 1,118 | 0.09 | % | 1,086 | 0.09 | % | 1,033 | 0.09 | % | ||||||||||||||||
| Total loans, net of deferred costs | $ | 1,308,654 | $ | 1,291,537 | $ | 1,280,773 | $ | 1,151,130 | $ | 1,146,439 | |||||||||||||||||||||
| * Derived from audited financial statements. | |||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | * | (Unaudited) | |||||||||||||||||||||||||||
| BY ACQUIRED AND NON-ACQUIRED | September 30, 2018 | % | June 30, 2018 | % | March 31, 2018 | % | December 31, 2017 | % | September 30, 2017 | % | |||||||||||||||||||||
| Acquired loans - performing | $ | 107,142 | 8.19 | % | $ | 115,157 | 8.92 | % | $ | 121,615 | 9.50 | % | $ | - | 0.00 | % | $ | - | 0.00 | % | |||||||||||
| Acquired loans - purchase credit impaired ("PCI") | 3,511 | 0.27 | % | 3,839 | 0.30 | % | 3,871 | 0.30 | % | - | 0.00 | % | - | 0.00 | % | ||||||||||||||||
| Total acquired loans | 110,653 | 8.46 | % | 118,996 | 9.22 | % | 125,486 | 9.81 | % | - | 0.00 | % | - | 0.00 | % | ||||||||||||||||
| Non-acquired loans** | 1,197,084 | 91.54 | % | 1,171,419 | 90.78 | % | 1,154,169 | 90.19 | % | 1,150,044 | 100.00 | % | 1,145,406 | 100.00 | % | ||||||||||||||||
| Gross loans | 1,307,737 | 1,290,415 | 1,279,655 | 1,150,044 | 1,145,406 | ||||||||||||||||||||||||||
| Net deferred costs (fees) | 917 | 0.07 | % | 1,122 | 0.09 | % | 1,118 | 0.09 | % | 1,086 | 0.09 | % | 1,033 | 0.09 | % | ||||||||||||||||
| Total loans, net of deferred costs | $ | 1,308,654 | $ | 1,291,537 | $ | 1,280,773 | $ | 1,151,130 | $ | 1,146,439 | |||||||||||||||||||||
| * Derived from audited financial statements. | |||||||||||||||||||||||||||||||
| ** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments. | |||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| ALLOWANCE FOR LOAN LOSSES | |||||||||||||||||||||
| THREE MONTHS ENDED | |||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| (dollars in thousands) | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
| Beginning of period | $ | 10,725 | $ | 10,471 | $ | 10,515 | $ | 10,435 | $ | 10,434 | |||||||||||
| Charge-offs | (219 | ) | (164 | ) | (580 | ) | (13 | ) | (253 | ) | |||||||||||
| Recoveries | 193 | 18 | 36 | 63 | 30 | ||||||||||||||||
| Net charge-offs | (26 | ) | (146 | ) | (544 | ) | 50 | (223 | ) | ||||||||||||
| Provision for loan losses | 40 | 400 | 500 | 30 | 224 | ||||||||||||||||
| End of period | $ | 10,739 | $ | 10,725 | $ | 10,471 | $ | 10,515 | $ | 10,435 | |||||||||||
| Net charge-offs to average loans (annualized) | -0.01 | % | -0.05 | % | -0.17 | % | 0.02 | % | -0.08 | % | |||||||||||
| Breakdown of general and specific allowance as a percentage of gross loans | |||||||||||||||||||||
| General allowance | $ | 9,729 | $ | 9,359 | $ | 9,310 | $ | 9,491 | $ | 9,617 | |||||||||||
| Specific allowance | 1,010 | 1,366 | 1,161 | 1,024 | 818 | ||||||||||||||||
| $ | 10,739 | $ | 10,725 | $ | 10,471 | $ | 10,515 | $ | 10,435 | ||||||||||||
| General allowance | 0.74 | % | 0.73 | % | 0.73 | % | 0.82 | % | 0.84 | % | |||||||||||
| Specific allowance | 0.08 | % | 0.11 | % | 0.09 | % | 0.09 | % | 0.07 | % | |||||||||||
| Allowance to gross loans | 0.82 | % | 0.83 | % | 0.82 | % | 0.91 | % | 0.91 | % | |||||||||||
| Allowance to non-acquired gross loans | 0.90 | % | 0.92 | % | 0.91 | % | 0.91 | % | 0.91 | % | |||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||||||||||
| SUMMARY OF DEPOSITS | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | (Unaudited) | (Unaudited) | (Unaudited) | * | (Unaudited) | |||||||||||||||||||||||||||
| September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||||||||||||||
| (dollars in thousands) | Balance | % | Balance | % | Balance | % | Balance | % | Balance | % | ||||||||||||||||||||||
| Noninterest-bearing demand | $ | 217,151 | 14.95 | % | $ | 214,249 | 16.18 | % | $ | 229,612 | 17.86 | % | $ | 159,844 | 14.45 | % | $ | 157,665 | 14.36 | % | ||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||
| Demand | 448,299 | 30.87 | % | 307,986 | 23.26 | % | 217,039 | 16.88 | % | 215,447 | 19.48 | % | 195,632 | 17.82 | % | |||||||||||||||||
| Money market deposits | 274,039 | 18.87 | % | 281,975 | 21.30 | % | 284,449 | 22.12 | % | 226,351 | 20.46 | % | 229,740 | 20.92 | % | |||||||||||||||||
| Savings | 71,003 | 4.89 | % | 73,142 | 5.52 | % | 76,360 | 5.94 | % | 52,990 | 4.79 | % | 54,310 | 4.95 | % | |||||||||||||||||
| Certificates of deposit | 441,879 | 30.42 | % | 446,516 | 33.73 | % | 478,476 | 37.21 | % | 451,605 | 40.82 | % | 460,654 | 41.95 | % | |||||||||||||||||
| Total interest-bearing | 1,235,220 | 85.05 | % | 1,109,619 | 83.82 | % | 1,056,324 | 82.14 | % | 946,393 | 85.55 | % | 940,336 | 85.64 | % | |||||||||||||||||
| Total Deposits | $ | 1,452,371 | 100.00 | % | $ | 1,323,868 | 100.00 | % | $ | 1,285,936 | 100.00 | % | $ | 1,106,237 | 100.00 | % | $ | 1,098,001 | 100.00 | % | ||||||||||||
| Transaction accounts | $ | 1,010,492 | 69.58 | % | $ | 877,352 | 66.27 | % | $ | 807,460 | 62.79 | % | $ | 654,632 | 59.18 | % | $ | 637,347 | 58.05 | % | ||||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||
| Reconciliation of US GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value. | |||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain performance measures, which exclude intangible assets. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
| Total assets | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | |||||||||||
| Less: intangible assets | |||||||||||||||||||||
| Goodwill | 10,708 | 10,603 | 10,277 | - | - | ||||||||||||||||
| Core deposit intangible | 2,993 | 3,186 | 3,385 | - | - | ||||||||||||||||
| Total intangible assets | 13,701 | 13,789 | 13,662 | - | - | ||||||||||||||||
| Tangible assets | $ | 1,662,708 | $ | 1,572,499 | $ | 1,563,334 | $ | 1,405,961 | $ | 1,402,172 | |||||||||||
| Total common equity | $ | 150,148 | $ | 147,246 | $ | 145,657 | $ | 109,957 | $ | 110,885 | |||||||||||
| Less: intangible assets | 13,701 | 13,789 | 13,662 | - | - | ||||||||||||||||
| Tangible common equity | $ | 136,447 | $ | 133,457 | $ | 131,995 | $ | 109,957 | $ | 110,885 | |||||||||||
| Common shares outstanding at end of period | 5,575,024 | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | ||||||||||||||||
| GAAP common equity to assets | 8.96 | % | 9.28 | % | 9.24 | % | 7.82 | % | 7.91 | % | |||||||||||
| Non-GAAP tangible common equity to tangible assets | 8.21 | % | 8.49 | % | 8.44 | % | 7.82 | % | 7.91 | % | |||||||||||
| GAAP common book value per share | $ | 26.93 | $ | 26.41 | $ | 26.13 | $ | 23.65 | $ | 23.85 | |||||||||||
| Non-GAAP tangible common book value per share | $ | 24.47 | $ | 23.94 | $ | 23.68 | $ | 23.65 | $ | 23.85 | |||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| CONDENSED CONSOLIDATED INCOME STATEMENT | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2018 | 2017 | 2017 | ||||||||||||||||
| Interest and Dividend Income | |||||||||||||||||||||
| Loans, including fees | $ | 15,085 | $ | 14,483 | $ | 14,726 | $ | 12,560 | $ | 12,671 | |||||||||||
| Interest and dividends on securities | 1,311 | 1,211 | 1,095 | 999 | 988 | ||||||||||||||||
| Interest on deposits with banks | 88 | 60 | 72 | 14 | 21 | ||||||||||||||||
| Total Interest and Dividend Income | 16,484 | 15,754 | 15,893 | 13,573 | 13,680 | ||||||||||||||||
| Interest Expense | |||||||||||||||||||||
| Deposits | 2,835 | 2,405 | 1,956 | 1,712 | 1,563 | ||||||||||||||||
| Short-term borrowings | 142 | 217 | 283 | 323 | 304 | ||||||||||||||||
| Long-term debt | 746 | 721 | 764 | 765 | 805 | ||||||||||||||||
| Total Interest Expense | 3,723 | 3,343 | 3,003 | 2,800 | 2,672 | ||||||||||||||||
| Net Interest Income (NII) | 12,761 | 12,411 | 12,890 | 10,773 | 11,008 | ||||||||||||||||
| Provision for loan losses | 40 | 400 | 500 | 30 | 224 | ||||||||||||||||
| NII After Provision For Loan Losses | 12,721 | 12,011 | 12,390 | 10,743 | 10,784 | ||||||||||||||||
| Noninterest Income | |||||||||||||||||||||
| Loan appraisal, credit, and misc. charges | 81 | 7 | 53 | 73 | 28 | ||||||||||||||||
| Gain on sale of asset | - | 1 | - | - | - | ||||||||||||||||
| Net gains (losses) on sale of investment securities | - | - | - | 42 | - | ||||||||||||||||
| Unrealized gains (losses) on equity securities | (8 | ) | (78 | ) | - | - | - | ||||||||||||||
| Income from bank owned life insurance | 227 | 224 | 226 | 192 | 196 | ||||||||||||||||
| Service charges | 770 | 747 | 752 | 686 | 639 | ||||||||||||||||
| Gain on sale of loans held for sale | - | - | - | - | 294 | ||||||||||||||||
| Total Noninterest Income | 1,070 | 901 | 1,031 | 993 | 1,157 | ||||||||||||||||
| Noninterest Expense | |||||||||||||||||||||
| Salary and employee benefits | 4,739 | 5,129 | 5,047 | 4,191 | 4,056 | ||||||||||||||||
| Occupancy expense | 744 | 739 | 766 | 691 | 630 | ||||||||||||||||
| Advertising | 165 | 180 | 159 | 139 | 156 | ||||||||||||||||
| Data processing expense | 769 | 782 | 683 | 588 | 555 | ||||||||||||||||
| Professional fees | 442 | 426 | 352 | 472 | 510 | ||||||||||||||||
| Merger and acquisition costs | 11 | 741 | 2,868 | 335 | 239 | ||||||||||||||||
| Depreciation of premises and equipment | 207 | 202 | 199 | 192 | 191 | ||||||||||||||||
| Telephone communications | 62 | 69 | 99 | 49 | 46 | ||||||||||||||||
| Office supplies | 31 | 41 | 40 | 33 | 26 | ||||||||||||||||
| FDIC Insurance | 185 | 113 | 198 | 133 | 178 | ||||||||||||||||
| OREO valuation allowance and expenses | 165 | 237 | 114 | 116 | 283 | ||||||||||||||||
| Core deposit intangible amortization | 193 | 199 | 205 | - | - | ||||||||||||||||
| Other | 779 | 891 | 937 | 800 | 572 | ||||||||||||||||
| Total Noninterest Expense | 8,492 | 9,749 | 11,667 | 7,739 | 7,442 | ||||||||||||||||
| Income before income taxes | 5,299 | 3,163 | 1,754 | 3,997 | 4,499 | ||||||||||||||||
| Income tax expense | 1,441 | 828 | 533 | 4,456 | 1,717 | ||||||||||||||||
| Net Income (Loss) | $ | 3,858 | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | ||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| * | |||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2018 | 2017 | 2017 | ||||||||||||||||
| Assets | |||||||||||||||||||||
| Cash and due from banks | $ | 26,718 | $ | 16,718 | $ | 29,739 | $ | 13,315 | $ | 15,627 | |||||||||||
| Federal funds sold | 36,099 | - | 730 | - | - | ||||||||||||||||
| Interest-bearing deposits with banks | 8,778 | 3,667 | 3,986 | 2,102 | 1,577 | ||||||||||||||||
| Securities available for sale (AFS), at fair value | 107,962 | 79,026 | 66,603 | 68,285 | 61,376 | ||||||||||||||||
| Securities held to maturity (HTM), at amortized cost | 97,217 | 100,842 | 97,949 | 99,125 | 104,530 | ||||||||||||||||
| Equity securities carried at fair value through income | 4,359 | 4,367 | 4,421 | - | |||||||||||||||||
| Non-marketable equity securities held in other financial institutions | 249 | 249 | 249 | 121 | |||||||||||||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 2,547 | 4,311 | 5,587 | 7,276 | 7,447 | ||||||||||||||||
| Loans receivable | 1,308,654 | 1,291,537 | 1,280,773 | 1,151,130 | 1,146,439 | ||||||||||||||||
| Less: allowance for loan losses | (10,739 | ) | (10,725 | ) | (10,471 | ) | (10,515 | ) | (10,435 | ) | |||||||||||
| Net Loans | 1,297,915 | 1,280,812 | 1,270,302 | 1,140,615 | 1,136,004 | ||||||||||||||||
| Goodwill | 10,708 | 10,603 | 10,277 | - | - | ||||||||||||||||
| Premises and equipment, net | 22,433 | 22,472 | 22,496 | 21,391 | 21,751 | ||||||||||||||||
| Premises and equipment held for sale | - | 600 | 2,341 | - | - | ||||||||||||||||
| Other real estate owned (OREO) | 8,207 | 8,305 | 9,352 | 9,341 | 9,741 | ||||||||||||||||
| Accrued interest receivable | 5,032 | 4,786 | 4,749 | 4,511 | 4,494 | ||||||||||||||||
| Investment in bank owned life insurance | 36,071 | 35,843 | 35,619 | 29,398 | 29,206 | ||||||||||||||||
| Core deposit intangible | 2,993 | 3,186 | 3,385 | - | - | ||||||||||||||||
| Net deferred tax assets | 6,999 | 6,624 | 6,239 | 5,922 | |||||||||||||||||
| Other assets | 2,122 | 3,877 | 2,972 | 4,559 | 10,419 | ||||||||||||||||
| Total Assets | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | |||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||
| Liabilities | |||||||||||||||||||||
| Deposits | |||||||||||||||||||||
| Non-interest-bearing deposits | $ | 217,151 | $ | 214,249 | $ | 229,612 | $ | 159,844 | $ | 157,665 | |||||||||||
| Interest-bearing deposits | 1,235,220 | 1,109,619 | 1,056,324 | 946,393 | 940,336 | ||||||||||||||||
| Total deposits | 1,452,371 | 1,323,868 | 1,285,936 | 1,106,237 | 1,098,001 | ||||||||||||||||
| Short-term borrowings | 5,000 | 36,500 | 51,500 | 87,500 | 91,500 | ||||||||||||||||
| Long-term debt | 20,451 | 30,467 | 45,483 | 55,498 | 55,514 | ||||||||||||||||
| Guaranteed preferred beneficial interest in | |||||||||||||||||||||
| junior subordinated debentures (TRUPs) | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 | ||||||||||||||||
| Subordinated notes - 6.25% | 23,000 | 23,000 | 23,000 | 23,000 | 23,000 | ||||||||||||||||
| Accrued expenses and other liabilities | 13,439 | 13,207 | 13,420 | 11,769 | 11,272 | ||||||||||||||||
| Total Liabilities | 1,526,261 | 1,439,042 | 1,431,339 | 1,296,004 | 1,291,287 | ||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||
| Common stock | 56 | 56 | 56 | 46 | 46 | ||||||||||||||||
| Additional paid in capital | 84,246 | 84,106 | 83,947 | 48,209 | 47,994 | ||||||||||||||||
| Retained earnings | 69,295 | 66,021 | 64,307 | 63,648 | 64,375 | ||||||||||||||||
| Accumulated other comprehensive loss | (2,633 | ) | (2,182 | ) | (1,898 | ) | (1,191 | ) | (538 | ) | |||||||||||
| Unearned ESOP shares | (816 | ) | (755 | ) | (755 | ) | (755 | ) | (992 | ) | |||||||||||
| Total Stockholders' Equity | 150,148 | 147,246 | 145,657 | 109,957 | 110,885 | ||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | |||||||||||
| Common shares issued and outstanding | 5,575,024 | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | ||||||||||||||||
| * Derived from audited financial statements. | |||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION AND RATIOS | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2018 | 2017 | 2017 | ||||||||||||||||
| KEY OPERATING RATIOS | |||||||||||||||||||||
| Return on average assets | 0.96 | % | 0.59 | % | 0.31 | % | (0.13 | ) | % | 0.80 | % | ||||||||||
| Return on average common equity | 10.29 | 6.34 | 3.33 | (1.62 | ) | 9.99 | |||||||||||||||
| Average total equity to average total assets | 9.34 | 9.32 | 9.28 | 8.08 | 7.97 | ||||||||||||||||
| Interest rate spread | 3.22 | 3.21 | 3.36 | 3.14 | 3.24 | ||||||||||||||||
| Net interest margin | 3.43 | 3.41 | 3.54 | 3.29 | 3.38 | ||||||||||||||||
| Cost of funds | 1.03 | 0.94 | 0.84 | 0.88 | 0.84 | ||||||||||||||||
| Cost of deposits | 0.84 | 0.74 | 0.62 | 0.63 | 0.58 | ||||||||||||||||
| Cost of debt | 3.68 | 3.17 | 2.59 | 2.34 | 2.34 | ||||||||||||||||
| Efficiency ratio | 61.40 | 73.23 | 83.81 | 65.79 | 61.18 | ||||||||||||||||
| Efficiency ratio - Non-GAAP ** | 60.09 | 65.51 | 62.39 | 62.16 | 56.88 | ||||||||||||||||
| Non-interest expense to average assets | 2.11 | 2.47 | 2.95 | 2.21 | 2.13 | ||||||||||||||||
| Net operating expense to average assets | 1.85 | 2.24 | 2.69 | 1.93 | 1.80 | ||||||||||||||||
| Net operating expense to average assets - Non-GAAP ** | 1.80 | 1.97 | 1.94 | 1.81 | 1.65 | ||||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 121.38 | 121.22 | 121.10 | 117.76 | 116.64 | ||||||||||||||||
| Net charge-offs to average loans | 0.01 | 0.05 | 0.17 | (0.02 | ) | 0.08 | |||||||||||||||
| COMMON SHARE DATA | |||||||||||||||||||||
| Basic net income per common share | $ | 0.70 | $ | 0.42 | $ | 0.22 | $ | (0.10 | ) | $ | 0.60 | ||||||||||
| Diluted net income per common share | 0.70 | 0.42 | 0.22 | (0.10 | ) | 0.60 | |||||||||||||||
| Cash dividends paid per common share | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | ||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||
| Basic | 5,551,184 | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,391 | ||||||||||||||||
| Diluted | 5,551,184 | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,417 | ||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||
| Total assets | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | |||||||||||
| Gross loans | 1,307,737 | 1,290,415 | 1,279,655 | 1,150,044 | 1,145,406 | ||||||||||||||||
| Classified Assets | 37,369 | 43,536 | 44,736 | 50,298 | 39,172 | ||||||||||||||||
| Allowance for loan losses | 10,739 | 10,725 | 10,471 | 10,515 | 10,435 | ||||||||||||||||
| Past due loans - 31 to 89 days | 6,499 | 582 | 5,231 | 9,227 | 1,642 | ||||||||||||||||
| Past due loans >=90 days | 9,666 | 12,347 | 6,281 | 2,483 | 2,741 | ||||||||||||||||
| Total past due loans | 16,165 | 12,929 | 11,512 | 11,710 | 4,383 | ||||||||||||||||
| Non-accrual loans | 16,350 | 14,492 | 8,439 | 4,693 | 3,012 | ||||||||||||||||
| Accruing troubled debt restructures (TDRs) | 9,839 | 9,864 | 9,953 | 10,021 | 10,069 | ||||||||||||||||
| Other real estate owned (OREO) | 8,207 | 8,305 | 9,352 | 9,341 | 9,741 | ||||||||||||||||
| Non-accrual loans, OREO and TDRs | $ | 34,396 | $ | 32,661 | $ | 27,744 | $ | 24,055 | $ | 22,822 | |||||||||||
| ASSET QUALITY RATIOS | |||||||||||||||||||||
| Classified assets to total assets | 2.23 | % | 2.74 | % | 2.84 | % | 3.58 | % | 2.79 | % | |||||||||||
| Classified assets to risk-based capital | 20.12 | 23.88 | 24.81 | 32.10 | 24.97 | ||||||||||||||||
| Allowance for loan losses to total loans | 0.82 | 0.83 | 0.82 | 0.91 | 0.91 | ||||||||||||||||
| Allowance for loan losses to non-accrual loans | 65.68 | 74.01 | 124.08 | 224.06 | 346.45 | ||||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.50 | 0.05 | 0.41 | 0.80 | 0.14 | ||||||||||||||||
| Past due loans >=90 days to total loans | 0.74 | 0.96 | 0.49 | 0.22 | 0.24 | ||||||||||||||||
| Total past due (delinquency) to total loans | 1.24 | 1.00 | 0.90 | 1.02 | 0.38 | ||||||||||||||||
| Non-accrual loans to total loans | 1.25 | 1.12 | 0.66 | 0.41 | 0.26 | ||||||||||||||||
| Non-accrual loans and TDRs to total loans | 2.00 | 1.89 | 1.44 | 1.28 | 1.14 | ||||||||||||||||
| Non-accrual loans and OREO to total assets | 1.46 | 1.44 | 1.13 | 1.00 | 0.91 | ||||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 2.05 | 2.06 | 1.76 | 1.71 | 1.63 | ||||||||||||||||
| COMMON SHARE DATA | |||||||||||||||||||||
| Book value per common share | $ | 26.93 | $ | 26.41 | $ | 26.13 | $ | 23.65 | $ | 23.85 | |||||||||||
| Tangible book value per common share** | 24.47 | 23.94 | 23.68 | *** | *** | ||||||||||||||||
| Common shares outstanding at end of period | 5,575,024 | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | ||||||||||||||||
| OTHER DATA | |||||||||||||||||||||
| Full-time equivalent employees | 190 | 195 | 200 | 165 | 169 | ||||||||||||||||
| Branches (1) | 12 | 12 | 16 | 11 | 11 | ||||||||||||||||
| Loan Production Offices | 5 | 5 | 5 | 5 | 5 | ||||||||||||||||
| REGULATORY CAPITAL RATIOS | |||||||||||||||||||||
| Tier 1 capital to average assets | 9.51 | % | 9.46 | % | 9.35 | % | 8.79 | % | 8.82 | % | |||||||||||
| Tier 1 common capital to risk-weighted assets | 10.30 | 10.32 | 10.31 | 9.51 | 9.81 | ||||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.18 | 11.23 | 11.23 | 10.53 | 10.87 | ||||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.67 | 13.78 | 13.80 | 13.40 | 13.81 | ||||||||||||||||
| Tangible common equity to tangible assets ** | |||||||||||||||||||||
| ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. | |||||||||||||||||||||
| *** The Company had no intangible assets before January 1, 2018. | |||||||||||||||||||||
| (1) The Company closed four of the five acquired County First branches in May 2018. | |||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2018 | 2017 | 2017 | ||||||||||||||||
| RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||
| Efficiency ratio - GAAP basis | |||||||||||||||||||||
| Noninterest expense | $ | 8,492 | $ | 9,749 | $ | 11,667 | $ | 7,739 | $ | 7,442 | |||||||||||
| Net interest income plus noninterest income | 13,831 | 13,312 | 13,921 | 11,766 | 12,165 | ||||||||||||||||
| Efficiency ratio - GAAP basis | 61.40 | % | 73.23 | % | 83.81 | % | 65.79 | % | 61.18 | % | |||||||||||
| Efficiency ratio - Non-GAAP basis | |||||||||||||||||||||
| Noninterest Expense | $ | 8,492 | $ | 9,749 | $ | 11,667 | $ | 7,739 | $ | 7,442 | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Merger and acquisition costs | (11 | ) | (741 | ) | (2,868 | ) | (335 | ) | (239 | ) | |||||||||||
| OREO valuation allowance and expenses | (165 | ) | (237 | ) | (114 | ) | (116 | ) | (283 | ) | |||||||||||
| Noninterest expense - as adjusted | 8,316 | 8,771 | 8,685 | 7,288 | 6,920 | ||||||||||||||||
| Net interest income plus noninterest income | 13,831 | 13,312 | 13,921 | 11,766 | 12,165 | ||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| (Gains) losses on sale of asset | - | (1 | ) | - | - | - | |||||||||||||||
| Net (gains) losses on sale of investment securities | - | - | - | (42 | ) | - | |||||||||||||||
| Unrealized (gains) losses on equity securities | 8 | 78 | - | - | - | ||||||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 13,839 | $ | 13,389 | $ | 13,921 | $ | 11,724 | $ | 12,165 | |||||||||||
| Efficiency ratio -Non-GAAP basis | 60.09 | % | 65.51 | % | 62.39 | % | 62.16 | % | 56.88 | % | |||||||||||
| Net operating exp. to average assets ratio - GAAP basis | |||||||||||||||||||||
| Average Assets | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | |||||||||||
| Noninterest expense | 8,492 | 9,749 | 11,667 | 7,739 | 7,442 | ||||||||||||||||
| less: noninterest income | (1,070 | ) | (901 | ) | (1,031 | ) | (993 | ) | (1,157 | ) | |||||||||||
| Net operating exp. | $ | 7,422 | $ | 8,848 | $ | 10,636 | $ | 6,746 | $ | 6,285 | |||||||||||
| Net operating exp. to average assets - GAAP basis | 1.85 | % | 2.24 | % | 2.69 | % | 1.93 | % | 1.80 | % | |||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | |||||||||||||||||||||
| Average Assets | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | |||||||||||
| Net operating exp. | 7,422 | 8,848 | 10,636 | 6,746 | 6,285 | ||||||||||||||||
| Non-GAAP adjustments noninterest expense: | |||||||||||||||||||||
| Merger and acquisition costs | (11 | ) | (741 | ) | (2,868 | ) | (335 | ) | (239 | ) | |||||||||||
| OREO valuation allowance and expenses | (165 | ) | (237 | ) | (114 | ) | (116 | ) | (283 | ) | |||||||||||
| Non-GAAP adjustments non interest income: | |||||||||||||||||||||
| Gains (losses) on sale of asset | - | 1 | - | - | - | ||||||||||||||||
| Net gains (losses) on sale of investment securities | - | - | - | 42 | - | ||||||||||||||||
| Unrealized gains (losses) on equity securities | (8 | ) | (78 | ) | - | - | - | ||||||||||||||
| Net operating exp.-adjusted | $ | 7,238 | $ | 7,793 | $ | 7,654 | $ | 6,337 | $ | 5,763 | |||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.80 | % | 1.97 | % | 1.94 | % | 1.81 | % | 1.65 | % | |||||||||||